Top Two Reasons for Building Your Referral Business

By PChip | Category: Business Management |

The message I bring today is for both product and service related digi-scrap businesses.  The business of referrals makes since for just about any type of business for several reasons:

1. Referrals can build your level of satisfied customers even when sales aren’t made.  Friends listen to friends and many times tend to adopt each others views too.  When a satisfied customer refers someone to you, the referral already has a certain level of satisfaction when they make their first contact with you, just based on their friends recommendation alone.  Then when the referral gets great service from you too, they tell another friend and it becomes self-perpetual.  Sometimes you don’t even have to get a sale from them before they turn around and tell another friend about your product/service.  You can get a new lead from a referral that sounds something like, “Suzy told me the lady up the street can do up a digital scrapbook for you at a pretty good price.  I saw Suzy’s book and it was awesome!”  The referral cycle then repeats itself and you’ll realize more and more “satisfied” customers referring others to your company.  In this second case scenario, you never did any direct marketing to Suzy’s friends at all! 

2. Referrals increases your sales revenue.  According to Tom Hopkins (a world-renowned sales trainer) - your closing ratio for non-qualified leads is 10% versus a 60% close ratio with referred leads.  Let me draw this out for you using a common example seen online.  Let’s say you have 100 new visitors come to your online digi-scrap store in an hour.  In that same hour another 100 visitors come by who have been referred to your site from their friends who have already bought from you.  From the first group of non-qualified visitors, maybe 10 of them will make a purchase.  From the set of visitors who came by way of a referral from their friends, you are likely to see 60 of them make a purchase.

So what do these examples tell you about the worth of a referral business?  I hope it tells you that putting your energies into building strong ties and high satisfaction ratings with your buying customers is well worth the effort.

Tip: To see the highest return on your investment, follow the 80/20 rule with your marketing efforts by spending 80% of your time and money on your customers and 20% of your resources marketing to new leads.

Mini-Tasker:  Think of 3 new ways you can market to your existing customers and encourage them to refer you to their friends.  Focus most of your marketing efforts on developing these 3 efforts this week.

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5 comments
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  1. Olga September 29th, 2007 1:42 pm :

    Very interesting information the one about the referrals and spending more on marketing directed towards your existing customer than towards getting new customers. On a first thought you will think in doing the other way around. :)

    Best wishes.:O)

  2. David September 29th, 2007 8:56 pm :

    Tip for Day 28: Scrapping usually involves a balance between content gathering, photography, planning, layout and many other factors.

    When thinking about content, make a point to ask questions of your relatives, especially of those getting on in years. Once these opportunities are missed, they can never be replaced.

    When my father passed unexpectedly a few months ago, we ended up with a box of photos, many of which we have no idea who is in them, where they were taken and what they meant.

    I am just grateful that weeks before, Marty had taken the time to ask a huge list of questions of him and he had written back with comprehensive answers.

    Questions about school, growing up, etc. which helped me discover a lot about him that I never realized.

    Take a few minutes and put that list together, and make the effort to record the memories, hope and ideas of those that mean most to you.

    Olga: More commentary on referrals here: http://dsd-professionals.com/124/two-tips-for-digi-scrap-bloggers/#comment-311

  3. Olga September 30th, 2007 8:11 pm :

    Thanks for guiding me to that comment. :) I didn’t know about the AIDA sales method, I’m just curious about all this and really getting to know more about this sector. :)

    Best wishes.:O)

  4. PChip September 30th, 2007 8:20 pm :

    That’s so true David! We have a box of mystery people pictures too. Sure wish we had some info on these folks.

  5. DSD-Pro Business Reports » Digi-Scrap Business Report Issue #0004 March 31st, 2008 12:21 pm :

    […] Building your referral business is part of relationship marketing.  You can read about the top two reasons for building your referral business on our blog and get a better understanding of how relationship marketing can benefit your […]

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